On Dec 29, 2015, Zacks Investment Research upgraded New Jersey-based Ascena Retail Group Inc. ASNA, to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Ascena, which recently acquired the Ann Taylor Parent, ANN Inc., is positioned to grow, as is evident from its positive surprise trend and robust outlook. The company has delivered an average positive surprise of 6.6% over the past four quarters.
The company posted better-than-expected first-quarter fiscal 2016 earnings, backed by robust sales at maurices and Lane Bryant, coupled with gross margin recovery at the underperforming brands. Ascena’s quarterly adjusted earnings from continuing operations rose 9.1% year over year to 36 cents per share, beating the Zacks Consensus Estimate of 29 cents.
Further, the company believes that it is well on track to integrate ANN’s operations into its business. Also, management is impressed with the margin recovery witnessed at Justice, Ann Taylor and LOFT, though dressbarn continued to disappoint. The company remains hopeful of delivering future growth, backed by its compelling assortments, favorable mix and effective inventory management strategies.
Given the solid start to fiscal 2016, the company now envisions gross margin to expand in a range of 56.3%–56.8%, up from its previous prediction of 55.0%–55.5%. Ascena reiterated its earnings guidance for the fiscal, projecting earnings in the band of 75–80 cents per share.
Following the solid results and favorable outlook, the company’s estimates for fiscal 2016 and fiscal 2017 witnessed an uptrend. Over the last 30 days, the Zacks Consensus Estimate for fiscal 2016 jumped 1.3% to 78 cents per share, while the same for fiscal 2017 went up 2% to $1.02 per share.
Ascena is now a leading apparel retail chain that sells clothing, shoes, and accessories for missy and plus-size women through its Ann Taylor, LOFT, Lou & Grey, Lane Bryant, Cacique, maurices, dressbarn, and Catherines brands. It also offers merchandise for tween girls under the Justice brand. The company sells its products through its 4,900 stores across the United States, Canada and Puerto Rico.
Other Stocks to Consider
Other favorably ranked retail stocks that look promising and are expected to continue with their upbeat performance include Abercrombie & Fitch Co. ANF, American Eagle Outfitters Inc. AEO and Foot Locker Inc. FL. While Abercrombie & Fitch and American Eagle carry a Zacks Rank #1, Foot Locker holds a Zacks Rank #2 (Buy).
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